State shrinks SDG&E’s plan to boost rates

Low-usage residents hit with 3% increase

RATE CHANGE EXAMPLES

• Low usage: The monthly bill for a customer using 500 kilowatt-hours will go up $1.60, or 2.2 percent, to $74.35.

• High usage: For a neighbor using twice as much electricity, the bill will go down $2.44, or 1 percent, to $231.45.

• Middle: The closer a customer’s usage is to 700 kilowatt-hours, the less their bill will change.

State regulators yesterday approved a request from San Diego Gas & Electric Co. to raise rates for residents who use a little power in order to lower them for people who use a lot — but they didn’t give the utility as big an increase as it wanted.

Noting that the inflation rate this year is zero, the California Public Utilities Commission approved a 3 percent increase — the minimum amount allowed under a recent state law. SDG&E had proposed a 5 percent hike, the maximum allowed.

The rate changes won’t mean the utility will make more money. The electric company will use the extra money it collects from those who use little power to lower rates for big users.

The idea is to bring rates in line with what electricity costs. Rates have been frozen since 2001 for the energy misers, so all increases since then have been charged to people who use more than 130 percent of the so-called baseline.

Consumer groups had backed legislation by state Sen. Christine Kehoe, D-San Diego, that led to the rate change. The law calls for the lowest rates to rise 3 percent to 5 percent, based on inflation.

SDG&E — joined by the state’s two other for-profit utilities, Southern California Edison and Pacific Gas and Electric Co. — asked for the maximum increase allowable, but the commission sided with San Diego’s Utility Consumers’ Action Network, or UCAN, which argued that with inflation flat this year, the minimum increase was more appropriate.

When the change was proposed, some customers complained that it punishes people who save electricity by increasing their costs and giving the money to people who use more power.

PUC President Michael Peevey bristled at that suggestion because power will still be much cheaper for people who use it sparingly.

“I see no way in which it can accurately be stated that this penalizes energy savers,” Peevey said. People who use electricity sparingly will still have much lower bills than people who don’t, he said.

The rate changes will mean that the monthly summer bill for an inland customer using 500 kilowatt-hours will go up $1.60, or 2.2 percent, to $74.35. A neighbor using twice as much power will still pay three times as much, with the bill going down $2.44, or 1 percent, to $231.45.

A customer in the middle, whose electric bill is about $134 a month, will not feel the change because the higher and lower rates offset each other. The closer that customers’ electricity usage is to 700 kilowatt-hours, the less their bill will change.

SDG&E spokeswoman Denise King said the rate changes are a move in the right direction.

“We are pleased that the CPUC is moving forward in trying to correct the current inequities that exist in today’s rates,” she said.

In asking for a 5 percent increase, SDG&E had noted that third-quarter inflation in 2008 was 5.8 percent.

The actual rates people pay will be different — but are still undetermined — because SDG&E is planning other rate changes for January. Cheaper natural gas is lowering costs, the company says, but more expensive insurance is raising them.

Rates will not change for low-income customers enrolled in California Alternate Rates for Energy, or CARE, who automatically get cheaper electricity.

Years ago, in a bid to get people to save power, California set rates in tiers that got more expensive as usage increased. The tiers were tied to the baseline, a calculation of minimal electric needs that takes into account where people live and the time of year but not how big their houses are or how many people live in them.

As a conservation measure, it worked, with California’s per capita electric usage staying flat for decades while the rest of the country’s continued to go up, UCAN Executive Director Michael Shames said.

By 2001, the difference between the rates was a few pennies, but enough to get people to save.

Then a crisis struck. Electric rates skyrocketed and consumers were angry. One part of the legislation designed to deal with the crisis froze rates for people using less than 130 percent of the baseline.

Since then, all the cost increases — including the cost of renewable power — have been paid for by people who use the more expensive power. The cheapest rates remained at 13 cents a kilowatt-hour. The most expensive rates more than doubled, to 33 cents from 15 cents.

That surprised the experts, who expected the price difference between the tiers to remain much smaller.

The freeze was tied to the state paying off bonds that financed the big electric contracts signed during the crisis. The bonds are expected to be paid off in the next few years, and once the freeze is gone, rates could rise quickly. So the utilities, public officials and consumer advocates negotiated a compromise that led to this year’s legislation, which creates a plan to allow rates to gradually come closer together.

For the next few years, the cheaper power will go up 3 percent to 5 percent a year until it more closely matches what electricity costs to produce. In the end, the cheaper power will still be priced less than it costs to produce, giving people an incentive to reduce usage.

At yesterday’s meeting in San Francisco, Commissioner Rachelle Chong said the rate tiers have outlived their usefulness as a conservation measure because they are too blunt for the problems facing the electric grids.

Such rates help tamp down overall usage, she said, “but it really only represents the tip of the iceberg.”

For instance, Chong said, a big problem is peak usage — the amount of power needed on a hot summer day. Power plants and transmission lines have to be built based on the maximum amount of electricity the system is expected to need on the hottest day.

It would be better if people had an incentive to cut usage on those days, not simply over a whole month to minimize their overall electric bill, she said. She suggested implementing pricing based on the time of day, and meters and tools to give customers real-time information about how much their power costs.

“We need smarter rates,” Chong said in what is likely her last meeting on the commission. Her term ends this year. Gov. Arnold Schwarzenegger has renominated her, but Senate Democrats said they won’t confirm her, calling her anti-consumer.